Alaska Airlines buys Virgin America for $2.6 billion

Seattle based Alaska Airlines has agreed to purchase Virgin America for $2.6 billion and become the fifth largest US airline. The new combined airline will offer 1,200 daily flights with 280 aircraft. The combined company will have hubs in Anchorage, Los Angeles, Portland, San Francisco, and Seattle. The deal is expected to close by January 1, 2017.

Highlights:

Deal combines two leading airlines known for outstanding customer service and low fares.

Alaska Airlines expands its California presence, while creating new opportunities for growth and competition.

Transaction is expected to be accretive to adjusted earnings per share in first full year, increases annual revenues 27 percent to more than $7 billion and offers $225 million total net synergies annually at full integration.

Virgin America was founded in 2007 by billionaire Richard Branson. He only owns a 18% stake in Virgin America (mostly non-voting shares), and was not pleased with the Alaska purchase:

I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it. – Richard Branson

Virgin America has been a hot prospect as the airline industry continues to consolidate. JetBlue was rumored to have been in a bidding war with Alaska to purchase Virgin. The purchase will greatly improve Alaska’s presence in California and on the East Coast. Several of Virgin’s most popular routes are transcontinental flights from the Northeast to California.

If you are a Virgin America Elevate member your points will be merged into the Alaska Airlines Mileage Plan program at some point later this year or in 2017. There has been no discussion what the conversion ratio will be for turning Virgin Elevate miles into Alaska Mileage Plan. Find out more at Flybettertogether.com.